There’s No Failure Like Success

by Gordon Campbell

The home insulation joint initiative between the Key government and the Green Party is a genuine rarity. For one thing, it is the product of co-operation between two parties far apart on the ideological spectrum. Secondly, it has a long term pay-off since that the benefits will continue to be delivered long after the current government is history. Thirdly, amidst a climate of cutbacks, this is a big ticket commitment, of around $340-350 million to date. Finally, it is one of the relatively few recent innovations involving government expenditure not at risk of being captured only by the wealthy – instead, the scheme has the potential to help low and middle income residents, small businesses and major corporates alike, all of whom stand to gain from the health benefits and the economic activity generated by the work. Pity then, that the Budget seems likely to put the scheme on life support only until 2014, preparatory to killing it off, well short of its full potential.

What evidence exists that the scheme is being readied for a soft landing? First, look at the work done, and the work still left to do. Yes, on May 12, the scheme did celebrate the 150,000th home being made drier, and warmer – but well over 900,000 homes were estimated to need needed insulation when the scheme was first launched. On current plans, the funding is due to run out in mid 2013. On Budget night, it appears likely to receive only a brief reprieve, until 2014. At best, that will leave the scheme topping out at around 250,000 homes, less than a third of the way towards its achievable goal. Surely, such a rampant success story should be enabled to continue.

You’d think so, wouldn’t you? After all, an independent cost benefit evaluation of the scheme was initiated in 2010 by the Ministry of Economic Development. ….but the results of that study have so far been with-held. Details were withheld from the briefing by the Energy Efficiency and Conservation Authority (EECA) to the incoming government last December ( see p. 3 in the link above ) and also from the MED briefing on Energy and Resources – which says ( p.16) the programme has been “ well implemented” but then with-holds the details.

Finally, if you go to the NZ Centre For Sustainable Cities site – the Centre’s academics Philippa Howden-Chapman and Nick Preval were among the academics involved in the MED evaluation – you find this statement, which cites a passage from page six of the MED document linked to above :

The evaluation was completed in October 2011 [and] had produced very favourable results. Although at the present time the evaluations carried out have not been made publically available, an Internet search found the following text in the document Energy and Resources : A Portfolio Briefing to the Incoming Minister ( Dec 2011) :

“ The government’s $340 million Warm Up New Zealand : Heat Smart home insulation scheme has been well implemented, with a formal assessment of the scheme showing a strong net national benefit – primarily, from health benefits. The Energy Efficiency and Conservation Authority is keen to expand its successful energy efficiency programmes.”

This seems quite bizarre. This is a costly government programme. By all (abbreviated) accounts, it is successfully delivering its intended health benefits. Yet after MED had sought an independent evaluation and apparently got a glowing set of findings, the government’s response has been to bury the details of this success for the past seven months – so thoroughly that even some of the academics involved in writing the report have evidently needed to trawl through the Internet to find any further public trace of it.

The only conclusion one can draw is that the government is trying to dampen down public appreciation, and the subsequent demand for the scheme. Presumably, this would be in order to dial back the level of government subsidies, and – perhaps – to divert the labour force towards helping with the Christchurch recovery. Or, the government intentionally buried the MED report with the conscious intention of disinterring it on a day when it needs some good news. Such as perhaps….Thursday, May 24, zero Budget day.

The home insulation scheme deserves a better fate than being turned into a figleaf for the government on a bad day. The current scheme began on July 1st, 2009. It was conceived by the then Greens co-leader Jeanette Fitzsimons, who had pursued it with the Clark government. After the 2008 election the fledgling scheme was canned by the incoming government, who then did a U-turn and re-negotiated it, and provided it with a different focus. Instead of being targeted primarily to low and income earners, all comers could qualify.

In its bare bones, the scheme provides the general public with a 33% subsidy (up to $1,300) on the cost of an insulation job on houses built before 2000, and lifts the subsidy up to 60 % for those with a Community Services card. The insulation job is estimated to cost around $3,000 on average. The resident needs to stump up with the balance, from their own pocket or via a variety of other sources, such as local energy trusts. With over 900,000 houses in this country seen to be in need of insulation, the scheme was estimated to cost some $4.6 billion over its projected 15 year lifetime, if it were allowed to run its full course.

The health benefits of the scheme begin immediately, and continue over the lifetime of the house. Clearly, both a private and a public gain are involved. Individuals stay healthier, save on their energy bills and get a better quality of life from living in warmer, drier homes, while the nation saves on the health costs of treatment for the likes of asthma and pneumonia, and on the costs related to meeting higher levels of energy provision and consumption. At the outset of the home insulation scheme, the health needs being met by fixing our badly insulated homes were pretty clear :

Sixteen hundred more New Zealanders die every winter than during other seasons, with researchers pinning part of the blame on cold, damp and poorly maintained homes.

Otago University researchers analysed deaths over a 20-year period and found 1600 more people died during the four winter months….The bulk of the deaths were people with circulatory, respiratory illnesses and infectious diseases. Infants and elderly people accounted for many of those who died during winter, and almost 10 per cent more women died in winter than men, the study found.

The need for persisting with the task of home insulation remains. The ability to do something about it arose from Fitzsimons’ far-sighted analysis of the costs and benefits of the Emissions Trading Scheme which would (a) deliver windfall profits to the government and (b) impose considerable energy costs on the consumer, in a context where energy prices were already rising, independently of the ETS.

At this point in 2012, Metiria Turei, the Greens’ current co-leader is hoping the Budget announcement on the home insulation scheme will, at least, offer a chance of survival. “I’m hoping to see a commitment from government to continue it in some form or other. We put the extension of the home insulation scheme on the table after the election as part of the issues we wanted to discuss with national, for extending the MOU. [the Memo of Understanding outlining the terms for co-operation between the Greens and the government.]They of course declined to extend the MOU, which included at that time, declining to extend the home insulation scheme. While I don’t expect much from the government, I do hope to see some recognition from them of how successful its been, and a commitment to continue it in some form.” After mid 2013? “Yes, and beyond.”

The government, I reminded Turei, had been given the MED commissioned-report last October, endorsing the health benefits of the scheme. Did it seem odd to her as well, that the government had sat on that report for seven months? “Yes, it does seem unusual. In that its unusual for them to have done so with a report that shows one of their projects was successful. But at the same time, if they’re not that keen on extending it then I’m not surprised that they’ve sat on it. because the report shows that the report is both successful for families, and also for the economy. It has helped to build new business, and create new jobs. There’s no downside to this scheme.”

Right. But the figures for those with community cards who have already accessed the scheme are quite high. So does that mean the government can now begin to fold its tent, because the needs of those most at risk will have been met by 2013 ? Not at all, Turei insists. “The needs of those most at risk won’t be met in full by 2013. The scheme was originally designed as a fifteen year scheme for a billion homes. That need has not decreased – if anything, its likely to have increased. National, when they took on the scheme in 2008 removed the scheme’s priority focus on low income households. So, the new government extended the scheme to all households. Which is good for them – but it has meant that fewer low income households have been insulated, than would otherwise have been the case.”

On Budget day, the country will find out whether the government is still committed to the home insulation scheme beyond a token extension for a year or so, prior to termination. Nothing about the scheme’s basic logic has changed. Understandably, the likelihood of a premature winding down of the scheme does not impress Rick Leckinger, a former ministerial advisor on energy resources, and a key negotiator of the insulation scheme with both the Clark and the Key governments. Any concession to short term austerity would, in his view, be unwise.

Especially when, as a nation, we’re looking for ways to offset the likely rise in health costs with an ageing population? “Exactly, “ Leckinger says. “ And especially when you consider – and this has happened – the number of elderly who have taken up the scheme…The point is, if you avoid one pneumonia case with an old lady, who is just happier and healthier, you’ve saved the taxpayer money. You avoid one hospital case with pneumonia and the insulation has paid for itself. Everything else is cream. We always talk about the little kids, and the number of asthma-drive visits to the doctor. But it’s with the oldies where you get a lot of the benefits. “

Right. To that end, putting in home insulation would also be consistent with the aim of enabling the elderly to stay in their own homes for as long as possible – and not into rest homes prematurely, with all the personal and public costs involved. Yes, Leckinger agrees, repeating the Greens mantra about the potential savings : “You save one hospitalization, and the whole job has paid for itself.” It remains to be seen whether the government has taken that message to heart, and fronted up on Budget day with the funds required.